Coming Soon in Our March 2021 Political Risk Reports

PRS’ coverage of the Americas this month includes updates on recent developments in Paraguay and Suriname, as well as fully revised reports on Costa Rica and Canada, where a legislative logjam resulting from the governing Liberal Party’s lack of a parliamentary majority has fueled speculation that Prime Minister Justin Trudeau might call an election more than two years ahead of schedule. However, with support for the Liberals eroding amid a second wave of COVID-19 infections, Trudeau’s window of opportunity to translate a snap election into a Liberal majority has narrowed considerably over the past three months. In the meantime, NDP leader Jagmeet Singh has pledged that his party will not help the main opposition CPC topple the government during an ongoing health crisis.

The report will discuss the Liberals’ agenda and what the government can hope to accomplish in the near term, assuming the administration retains its minority status. The analysis will also include forecasts of any changes in policy course that could be expected under the alternative scenarios of a majority Liberal government or the election of a Conservative administration headed by Erin O’Toole, and how those might affect the overall risk profile.

As well as including a report on Austria this month, our coverage of Western European countries assesses the risk outlook in France where the government led by President Emmanuel Macron is still struggling to contain the coronavirus pandemic. With around 20-30,000 cases a day putting the healthcare system under enormous pressure, and resulting in temporary departmental-level lockdowns, the economy is still suffering the effects, not least in terms of consumer spending and services sector output, worsened by ongoing restrictions to travel and tourism. Against this backdrop, and while also weighing up the economic and social impact of the health crisis, we look into some recent political developments with relevance to prospective asset returns, including President Macron’s ambition to continue with reforms such as possible changes to the pension system before having to face elections scheduled for April 2022. We look at how the challenge posed by the far right National Rally leader Marine Le Pen might become more fearsome this time around in the wake of disappointment in Macron’s administration, high unemployment, immigration issues, and the recent conviction of former President Nicolas Sarkozy pointing the finger at corruption and influence peddling while undermining the traditional centre-right Les Républicains brand. With that in mind a particular focus is the government’s anti-extremism bill and what effect it might have on the elections and social cohesion in a country that is unfortunately all too familiar with extremist violence.

Coverage of Eastern Europe will include a full report on Poland, where the conservative PiS government’s repeated defiance of liberal norms contributes to chronic tense relations with the EU, the source of billions of euros in investment funding that is essential to sustaining the governing party’s popularity at home. Our analysis will include an examination of Warsaw’s relationship with Brussels, and an assessment of the danger that Poland might incur significant penalties for its transgressions. PRS will also address what the government’s inconsistent respect for the rule of law implies for the broader business climate and assess what a recent legal action by Czech Republic aimed at halting a Polish mining project could portend for Warsaw’s ability to set its own rules for environmentally sensitive investment projects if it continues within the EU framework.

Turning to the Middle East and North Africa, the roster for March includes a fully revised report on Israel, where voters will go to the polls this month for the fourth time in less than two years. Prime Minister Benjamin Netanyahu’s conservative Likud is poised to emerge with the most seats, but the challenge once again will be pulling together a viable coalition that provides the government with a bare Knesset majority of 61 seats. Poll results suggest that Likud will struggle to achieve that minimum without the backing of Yamina, whose leader, Neftali Bennett, has signaled that he will withhold his party’s support from a government headed by the corruption-tarred Netanyahu.

The report will assess the likelihood of various coalition scenarios based on the election results, and how the composition of what is certain to be an ideologically diverse collection of governing partners will factor into the specific policies pursued. Forecasts will focus on how coalition dynamics could affect policies related to financial stability and security, which is the main source of political risk in an otherwise hospitable business climate.

Our coverage of Asia includes a refreshed account of prospective risks in South Korea this month as well as a detailed report on Vietnam, which appears to have come through the COVID-19 crisis in good shape using an authoritarian-style rapid-response strategy to limit the number of cases, and deaths, while also preventing the economy from declining in 2020 to remain one of the strongest performers overall. Our report assesses prospects for 2021 with reference to economic growth, inflation, fiscal metrics, and ultimately investor opportunities by also highlighting any moves on the government’s behalf to attract more capital from overseas. As an important backdrop to this we delve into the machinations of the Communist Party of Vietnam (CPV) regime and discuss recent changes in the highest level of authority resulting from the latest CPV National Congress. The report outlines what the new leadership announcements imply both for current and prospective political stability in one of the world’s undeniably attractive emerging markets, noting in particular not only the old guard but also any new generation appointments with relevance to the political framework and future leadership. More immediately, for investors, we try to ascertain what will occur domestically in terms of anti-corruption policies and clamping down on dissent as well as in terms of the nation’s multi-vectored foreign policy. In that regard we place particular emphasis on the tense relationship with China and the impact on corporate plans such as the state-owned petroleum company’s offshore exploration ambitions given the contestable sovereignty rights playing out in the South China Sea.

Since 1979, The PRS Group Inc., has been a global leader in quant-based political and country risk ratings and forecasts. This commentary represents a sneak peek from our upcoming political risk reports. For more information please contact us at (315) 431-0511 and sales@prsgroup.com, or explore a subscription to PRS Online and/or ICRG Online today to receive political risk updates.

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